On Tuesday, increased geopolitical tensions in the Middle East and declining U.S. bond yields led to a significant rise in gold prices, breaking the $2,670 mark. Despite the Federal Reserve Chairman's indication of minimal future rate cuts, gold prices remained just below their recent historical highs.
Spot gold rose by 1.26% to $2,667.51 per ounce, after reaching an all-time high of $2,685.42 the previous Thursday. Meanwhile, U.S. gold futures edged up 0.4% to $2,671 per ounce.
The benchmark U.S. 10-year bond yield fell, enhancing the appeal of non-yielding gold to investors. According to Ricardo Evangelista, a senior analyst at ActivTrades, profit-taking and Chinese stimulus measures encouraging investment in Chinese stocks have limited gold's upward potential since reaching a historical high. Nonetheless, he emphasized that the factors driving recent gains, such as U.S. rate cut expectations and demand for safe havens due to geopolitical instability, remain unchanged.
In the Middle East, Israel reported intense fighting with Hezbollah in southern Lebanon. Federal Reserve Chairman Jerome Powell indicated a potential rate cut of 0.25%, leading to gold recording its largest single-day drop in over four weeks.
The market's focus now shifts to the U.S. ADP employment data release on Wednesday and the nonfarm payroll data on Friday, which will provide clearer insights into the health of the U.S. labor market.
Han Tan, Chief Market Analyst at Exinity Group, noted that higher-than-expected U.S. unemployment rates could force the Federal Reserve into a more aggressive easing stance, potentially driving gold prices back to historical highs. As long as the Federal Reserve maintains its rate cut expectations, short-term gold prices should reach $2,700.
Goldman Sachs has revised its gold price forecast for early 2025 from $2,700 to $2,900 per ounce, predicting increased ETF flows driven by rate cuts in the West and China, and central bank purchases.
Other precious metals also saw changes: spot silver rose 0.7% to $31.37 per ounce, platinum increased 0.4% to $979.83 per ounce, while palladium fell 0.8% to $991.36 per ounce.
